Intel’s estimates quarterly revenue to decline, stocks dip

Intel quarterly revenue: Intel disclosed on Thursday a first-quarter revenue forecast that could fall short of market estimates by over $2 billion, citing uncertain demand for its chips in the traditional server and personal computer markets. This announcement led to a 10 per cent decline in shares during after-hours trading, potentially resulting in a $20 billion reduction in market value on Friday.

CEO Pat Gelsinger explained that the core businesses of PCs and servers were experiencing a seasonal low demand, coinciding with decreased demand in non-core areas such as auto chip firm Mobileye. Intel, no longer providing full-year financial forecasts, highlighted $2 billion worth of orders for its AI chips and anticipated improved sales later in the year.

The chipmaker anticipates adjusted first-quarter revenue between $12.2 billion and $13.2 billion, contrasting with analysts' average estimate of $14.50 billion. The forecasted first-quarter profit is 13 cents per share, excluding one-time items, while analysts expected 33 cents per share.

Intel's gross margin, impacted by substantial AI investments, fell to the mid-30s in 2023 from prior highs of over 60 per cent. However, a mild recovery saw an adjusted gross margin of 45.8 per cent in the third quarter, with a reported fourth-quarter gross margin of 48.8 per cent. Analysts suggest that Intel needs to shift its focus from the personal computer division to deliver solid profits from data centres and AI or face further stock declines.

The year 2024 is considered a pivotal period for Intel, with analysts stating it will determine the company's success in AI PCs and AI-enabling chips. A shift in spending towards AI data servers, dominated by rivals Nvidia and Advanced Micro Devices, has impacted demand for Intel's traditional server chips.

While Intel is not yet competitive in the AI-specific chips market, CEO Gelsinger stated that about a third of Intel's server CPUs are sold as part of AI systems. The company expects more purchases of traditional servers this year, expressing confidence that they are past the worst in terms of Intel's server CPU business.

Intel's self-driving technology unit, Mobileye, reported fourth-quarter revenue below estimates, attributing it to a pullback in orders from customers clearing inventory. In a conference call, Intel revealed a winning chip manufacturing business from a significant high-performance computing customer but did not disclose the customer's name.

Intel, once a leading chipmaker, has faced challenges in recent years. Under Gelsinger's leadership, efforts have focused on building manufacturing capabilities and advancing semiconductor technology.

(With Reuters inputs)